The activity levels for the Orange County industrial market remained healthy in the second quarter, with approximately 2.2 million square feet of gross activity.
Gross activity was down by 15.5% from the first quarter, which can be partially attributed to the lack of available inventory options for tenants.
Gross activity for the first half of the year totaled 4.9 million square feet at the close of the quarter.
The North Orange County submarket recorded the majority of activity, posting a little more than 1 million square feet. The South Orange County submarket more than doubled its first-quarter gross activity, ending the quarter with 580,000 square feet.
Orange County had 333,208 square feet of positive net absorption during the quarter. The North and West Orange County submarkets had positive net absorption, generating 487,777 square feet and 69,955 square feet, respectively.
The Greater Airport Area recorded approximately 186,313 square feet of negative net absorption, while the South Orange County submarket had 38,211 square feet of negative net absorption. The county’s overall net absorption was down year-over-year by about 50,000 square feet.
Availability/Vacancy
The overall availability rate increased from the first-quarter rate of 5.1% to 5.5%, still below the 6.1% rate a year ago.
The overall vacancy rate, despite the increase in availability, experienced a decline from 2.6% to 2.5%. The availability rate for manufacturing and warehouse increased from 5.1% to 5.4%. The research and development sector remained at 5.5%.
The vacancy rate for research and development space declined for a second straight quarter, dropping from 3.2% to 2.9%, while the vacancy rate for manufacturing and warehouse also decreased, from 3.4% to 2.4%.
The overall average asking lease rate for Orange County remained constant at 67 cents per square foot. Asking lease rates have had slow growth for several quarters, changing only 1 cent per square foot since the second quarter of 2013.
The overall asking sale price increased from $139.36 per square foot to $140.35 per square foot. The research and development sector increased roughly $6 per square foot, from $156.36 in the first quarter to $163.63.
The manufacturing and warehouse sector’s average sale price remained virtually unchanged, ending the quarter at $134.75 per square foot, while the average asking lease rate for manufacturing and warehouse space increased 1 cent to 61 cents per square foot.
Industrial development in Orange County remained at 1.1 million square feet, with no additional construction beginning. That includes the 864,794 square feet under construction at the Anaheim Concourse and the 93,000 square feet under construction at 4850 La Palma Ave. in Anaheim. Development continues in Huntington Beach with construction at 17332 Gothard St., which involves two buildings totaling 144,754 square feet.
The high cost of land in Orange County and the competition from residential developers has made it very difficult for industrial development.
Analysis provided by CBRE Research
